DVCRFCLI at aol.com
02-22-1995, 08:00 PM
[from DVCRF's "Reinvestment News" by Casey O'Banion]
CLI CAN MAKE $1 MILLION LOANS
On July 1, 1994, DVCRF's Collaborative Lending Initiative (CLI) opened for
business. CLI, an affordable housing bank collaborative, makes large loans
for housing construction and rehabilitation. Incorporated to provide
affordable housing developers with loans up to $1 million without the
restrictions conventional lending institutions impose, this new arm of DVCRF
dramatically increases our ability to provide low-cost housing to renters and
first-time buyers.
CLI marries the needs of affordable housing developers and conventional
institutions so that an increasing amount of low-cost housing is efficiently
financed. CLI builds on the Collaborative Lending Initiative of Camden and is
now available throughout the nine-county area.
"DVCRF has always been involved in large construction loans," said Don
Hinkle, CLI's managing director who underwrites all CLI loans. "CLI makes the
process of getting the necessary amount of funding together simpler."
CLI provides developers with what they most need: flexible, fast and
affordable capital. CLI loans are priced at, or just above the prime rate,
making them cheaper than traditional bank loans. Likewise, CLI provides
bankers with what they most need: an effective means to move their funds
into their markets at higher returns. CLI is based on a belief that the
closer a CLI loan resembles a regular commercial loan, the more capital banks
will make available for affordable housing. "CLI loans are bigger but not
fundamentally different from DVCRF's other loans to non-profit affordable
housing projects," says Adina Abramowitz, CLI board president.
MACARTHUR FOUNDATION BACKS CLI
DVCRF jumpstarted CLI with $250,000 in below-market funds. In December, the
John D. & Catherine T. MacArthur Foundation committed a generous $1 million
program-related investment to DVCRF. This money enables DVCRF to purchase
subordinated notes in CLI. With every one dollar from DVCRF leveraging three
dollars from banks, a total of more than $4 million has been raised.
Kevin Bogan, Executive Director of Neighborhood Housing Services of Camden
(NHS), is confident in CLI: "DVCRF has been the sole construction lender for
our organization since 1986. CLI simply gives us a shot at bigger loans and sh
ows confidence in us as we take on more ambitious projects." The NHS
construction loan is producing 10 units of affordable housing in Central
Camden.
Bogan adds, "CLI provides conventional credit under DVCRF's umbrella. Everybod
y wins." The ability to use bank credit combined with DVCRF's proven
expertise in construction lending, technical assistance and research of
organizations -- without every participating bank's approval -- is a boon for
many organizations.
"We were pleased that CLI came through," Ernie Boyd of the North Camden Land
Trust (NCLT) said after closing its first CLI loan. Benefitting from a
$250,000 loan, the NCLT construction will fund about 12 jobs for a year and
help build 11 housing units.
BIG PROJECTS, BIG GOALS
The accessibility of an organization like CLI is pivotal to many urban
builders. Certain affordable housing projects require more debt financing
than DVCRF alone can provide. DVCRF can only make loans of up to $250,000 and
will continue its focus on the smaller, non-profit community-based borrower.
CLI will be a major catalyst for these larger housing projects in the
community. When DVCRF was founded there was no opportunity for builders to
create the scale of affordable housing like there is today. By working with
committed community organizations and creating close working relationships,
DVCRF has nurtured affordable housing development in Camden, Philadelphia,
Chester and Lower Bucks County. With that growth, a market for larger, more
complex projects has been created. Most importantly, the chance to build a
critical mass -- enough houses to make a difference -- is available. Beyond
being able to make large loans to non-profit borrowers pursuing large
projects, CLI can lend to community-minded for-profits, too.
CONFIDENCE BREEDS CONFIDENCE
While most banks would not consider lending unsecured capital to a new
organization, CLI encourages them to think twice. "DVCRF's track record is
incredible," said Martha Van Cleve, Vice President, Midlantic Bank. "It is
its lending history that convinced local banks to give CLI a go." CLI's
capacity to monitor loans during the risky construction period is
particularly appealing to small banks, most of which don't have the personnel
to make construction lending a viable business niche.
In just eight months CLI has made loan commitments that will build and
rehabilitate 112 units of affordable housing. On its second anniversary CLI
will have provided at least $5 million in financing for at least 160 units of
affordable housing in the Delaware Valley.
CLI already is an essential and integral part of the affordable housing
finance sector in the Delaware Valley with much more to come.
CLI BORROWING ORGANIZATIONS
Camden County Council on Economic Opportunity, Inc., a non-profit venture in
the Cramer Hill section of east Camden is using its $420,000 loan to build 14
units of detached housing for sale to low income households. CCCOEO also
provides Head Start and weatherization services throughout Camden County.
Community Ventures. CLI's $600,000 loan will be used for a project expected
to break ground in Spring, 1995, for acquisition and rehabilitation of 15
townhouses (11 new, 4 rehab) in the Francisville section of North
Philadelphia.
Housing & Economic Opportunities of South Jersey, Inc. Based in Pennsauken,
NJ, HEOEO plans to rehabilitate five townhouses in Winslow Township, Camden
County, NJ, to sell to low income households with its $120,000 loan.
Girard Affordable Housing, L.P., a for-profit working in the Belmont section
of West Philadelphia, is using its $210,000 loan to rehabilitate three
townhouses comprising 9 apartments for low income renters. It was previously
denied DVCRF loans because of its for-profit status.
Neighborhood Housing Services of Camden. With a $302,000 loan, this
non-profit located in Central Camden is building 10 townhouses for sale. It
has been a DVCRF borrower since 1988.
North Camden Land Trust, is using a $250,000 loan to rehabilitate 8 scattered
site properties to create 11 housing units, a mix of duplexes and
single-family townhouses in North Camden.
Project HOME. Expected to receive a $1 million loan, Project HOME's 1515
Fairmount Project will provide 48 SRO (single room occupancy) housing units
in the Francisville section of North Philadelphia for previously homeless
individuals. The legal battles were resolved several months ago.
[from CLI's offering to prospective banks, by D. Hinkle]
CLI's MISSION STATEMENT
The Collaborative Lending Initiative, Inc. ("CLI") is a support corporation
of the Delaware Valley Community Reinvestment Fund, Inc. CLI exists to
increase the capital available to organizations that produce and/or operate
long term affordable housing for the economically and physically
disadvantaged. CLI seeks to increase the participation of conventional
financial institutions in the finance of such affordable housing through the
sale of loans, direct and indirect loan participation, technical assistance
and credit enhancements. CLI will increase access to capital through various
means; below market interest rates, liberal underwriting standards, technical
assistance in the application process, and reduced documentation and closing
costs.
EXECUTIVE SUMMARY
DVCRF has a history of lending in conjunction with banks to produce
affordable housing. This has happened through bank investments and equity
grants to the DVCRF loan pool and through co-lending and loan participations.
Today, banks represent 13% of DVCRF's $13 million loan fund.
Limits on DVCRF/Bank participation exist. This type of cooperation often
requires a lengthy turn-around time as two or more lenders underwrite and
approve each deal. Many banks have limited or no expertise in administering
construction loans and therefore cannot participate with DVCRF in this way.
Some banks share similar loan size constraints with DVCRF, limiting the size
of the project they can support. Finally, all banks are limited in underwriti
ng guidelines through regulation.
DVCRF proposes to form a support corporation, the Collaborative Lending Initia
tive, Inc.. This subsidiary will be a Pennsylvania non-profit corporation.
A 501c(3) designation will be requested. The purpose of the subsidiary will
be to finance community development projects that require loans in excess of
$250,000. The Collaborative Lending Initiative ("CLI") will seek to reduce
the limitations on DVCRF/Bank participations by standardizing and
streamlining the approval and administration processes.
CLI will have its own Board of Directors that will serve as a Loan Review
Committee. CLI will borrow from banks and DVCRF to fund the loans it makes.
To borrow from banks, CLI will seek to establish lines of credit in the form
of commitments to purchase promissory notes.
BENEFITS TO BANKS
* Access to DVCRF's construction lending expertise
Many community banks do not have the administrative or lending staff
necessary for successful construction lending and monitoring. CLI will
utilize the experienced DVCRF loan department and project consultants. Even
large regional banks can find it difficult to administer an affordable
housing construction loan in real estate departments structured for more
conventional lending.
* Low lending transaction costs vs. direct lending
Following a low income housing project from idea to completion can be a time
consuming process. The pressure on bank staff for efficiency limits the
number of loans that can be made to unsophisticated or inexperienced
borrowers. By financing an intermediary, banks gain a greater impact by
supporting a number of loans.
* Less risk due to diversity of portfolio and DVCRF's credit enhancement
The CLI Notes purchased by banks will be secured by all CLI assets. In turn,
each loan made by CLI will be secured. In addition to the underlying
collateral value securing the CLI portfolio, DVCRF (or other subordinate
lenders) will provide 25% of CLI's debt, subordinate to all bank Notes. This
25% discount on the portfolio provided by DVCRF's subordination is a
substantial credit enhancement to Note holders.
* Market rate return
Each Note issued will bear interest at the Prime Rate (as published by the
Wall Street Journal). We believe this rate of return is comparable to the
yield on direct construction lending, without the labor-intensive application
and monitoring processes.
* Access to DVCRF's extensive borrower base
The affordable housing industry in the Philadelphia market is complex..
Successful lending requires extensive knowledge of charitable funders,
federal, state & local government, governmental agencies, regulations, communi
ty organizations and builders. A non-performing loan with a non-profit can
be difficult and time consuming for a bank.
CLI will incorporate in its underwriting its extensive knowledge of the
industry in terms of borrowers, funders and regulators.
* An innovative method of Community Reinvestment Act compliance
CRA is a continuing, strengthening and evolving obligation of banks. The
consolidation of the banking industry will continue to make it more difficult
for community banks to remain CRA-relevant in the face of larger, regional
banks. Cooperation and innovation are logical methods for today's
community-oriented banks to meet CRA obligations.
DVCRF is committed to supporting local institutions with local capital.
Along those lines, CLI will provide a vehicle through which community banks
can begin to level the CRA playing field by pooling resources with an
experienced financial intermediary. Larger regional banks can benefit from
the economies of scale available with a lending intermediary.
STRUCTURE OF BANK LOANS TO CLI
Loan Type: Line of Credit (in the form of a commitment to purchase Notes)
Loan Amount: a minimum of $250,000 from each bank (in ten $25,000 Notes)
Loan Rate: WSJ Prime Rate, floating
Loan Term: The commitment to purchase Notes will be annually renewable
Note Term: Each Note will have a maturity date 3 years from the date it is
drawn
Note Repayment: Interest on each Note will be paid quarterly, principal will
be repaid from CLI loan portfolio repayments on or before maturity date
Pre-payment: Notes may be pre-paid in whole or in part, without penalty.
Collateral: Each bank will have general recourse to all CLI assets. Bank
lines will be enior to the DVCRF line of credit to provide a credit
enhancement. Specific loans will not collateralize the bank lines.
Documentation: Note Purchase Agreements and the Notes themselves will be
standardized legal documents to keep all lenders on equal footing.
Note Purchase: DVCRF will provide a written request for each Note purchase.
Bank purchaser agrees to advance funds by the end of the next business day.
DVCRF Line: DVCRF will provide a line of credit to CLI that will be
subordinated to all bank Notes. At all times, DVCRF (or other subordinate
Note holders) will hold a minimum of 25% of CLI's debt with the remaining
75% coming from bank Notes.
*********** Underwriting Standards, Policies and more programs description
available upon request:
Donald R. Hinkle
Managing Director - CLI
924 Cherry Street
Philadelphia, PA 19107
(215) 925-1130 voice
DVCRFCLI@aol.com
This post transferred from the cdb-l mailing list
CLI CAN MAKE $1 MILLION LOANS
On July 1, 1994, DVCRF's Collaborative Lending Initiative (CLI) opened for
business. CLI, an affordable housing bank collaborative, makes large loans
for housing construction and rehabilitation. Incorporated to provide
affordable housing developers with loans up to $1 million without the
restrictions conventional lending institutions impose, this new arm of DVCRF
dramatically increases our ability to provide low-cost housing to renters and
first-time buyers.
CLI marries the needs of affordable housing developers and conventional
institutions so that an increasing amount of low-cost housing is efficiently
financed. CLI builds on the Collaborative Lending Initiative of Camden and is
now available throughout the nine-county area.
"DVCRF has always been involved in large construction loans," said Don
Hinkle, CLI's managing director who underwrites all CLI loans. "CLI makes the
process of getting the necessary amount of funding together simpler."
CLI provides developers with what they most need: flexible, fast and
affordable capital. CLI loans are priced at, or just above the prime rate,
making them cheaper than traditional bank loans. Likewise, CLI provides
bankers with what they most need: an effective means to move their funds
into their markets at higher returns. CLI is based on a belief that the
closer a CLI loan resembles a regular commercial loan, the more capital banks
will make available for affordable housing. "CLI loans are bigger but not
fundamentally different from DVCRF's other loans to non-profit affordable
housing projects," says Adina Abramowitz, CLI board president.
MACARTHUR FOUNDATION BACKS CLI
DVCRF jumpstarted CLI with $250,000 in below-market funds. In December, the
John D. & Catherine T. MacArthur Foundation committed a generous $1 million
program-related investment to DVCRF. This money enables DVCRF to purchase
subordinated notes in CLI. With every one dollar from DVCRF leveraging three
dollars from banks, a total of more than $4 million has been raised.
Kevin Bogan, Executive Director of Neighborhood Housing Services of Camden
(NHS), is confident in CLI: "DVCRF has been the sole construction lender for
our organization since 1986. CLI simply gives us a shot at bigger loans and sh
ows confidence in us as we take on more ambitious projects." The NHS
construction loan is producing 10 units of affordable housing in Central
Camden.
Bogan adds, "CLI provides conventional credit under DVCRF's umbrella. Everybod
y wins." The ability to use bank credit combined with DVCRF's proven
expertise in construction lending, technical assistance and research of
organizations -- without every participating bank's approval -- is a boon for
many organizations.
"We were pleased that CLI came through," Ernie Boyd of the North Camden Land
Trust (NCLT) said after closing its first CLI loan. Benefitting from a
$250,000 loan, the NCLT construction will fund about 12 jobs for a year and
help build 11 housing units.
BIG PROJECTS, BIG GOALS
The accessibility of an organization like CLI is pivotal to many urban
builders. Certain affordable housing projects require more debt financing
than DVCRF alone can provide. DVCRF can only make loans of up to $250,000 and
will continue its focus on the smaller, non-profit community-based borrower.
CLI will be a major catalyst for these larger housing projects in the
community. When DVCRF was founded there was no opportunity for builders to
create the scale of affordable housing like there is today. By working with
committed community organizations and creating close working relationships,
DVCRF has nurtured affordable housing development in Camden, Philadelphia,
Chester and Lower Bucks County. With that growth, a market for larger, more
complex projects has been created. Most importantly, the chance to build a
critical mass -- enough houses to make a difference -- is available. Beyond
being able to make large loans to non-profit borrowers pursuing large
projects, CLI can lend to community-minded for-profits, too.
CONFIDENCE BREEDS CONFIDENCE
While most banks would not consider lending unsecured capital to a new
organization, CLI encourages them to think twice. "DVCRF's track record is
incredible," said Martha Van Cleve, Vice President, Midlantic Bank. "It is
its lending history that convinced local banks to give CLI a go." CLI's
capacity to monitor loans during the risky construction period is
particularly appealing to small banks, most of which don't have the personnel
to make construction lending a viable business niche.
In just eight months CLI has made loan commitments that will build and
rehabilitate 112 units of affordable housing. On its second anniversary CLI
will have provided at least $5 million in financing for at least 160 units of
affordable housing in the Delaware Valley.
CLI already is an essential and integral part of the affordable housing
finance sector in the Delaware Valley with much more to come.
CLI BORROWING ORGANIZATIONS
Camden County Council on Economic Opportunity, Inc., a non-profit venture in
the Cramer Hill section of east Camden is using its $420,000 loan to build 14
units of detached housing for sale to low income households. CCCOEO also
provides Head Start and weatherization services throughout Camden County.
Community Ventures. CLI's $600,000 loan will be used for a project expected
to break ground in Spring, 1995, for acquisition and rehabilitation of 15
townhouses (11 new, 4 rehab) in the Francisville section of North
Philadelphia.
Housing & Economic Opportunities of South Jersey, Inc. Based in Pennsauken,
NJ, HEOEO plans to rehabilitate five townhouses in Winslow Township, Camden
County, NJ, to sell to low income households with its $120,000 loan.
Girard Affordable Housing, L.P., a for-profit working in the Belmont section
of West Philadelphia, is using its $210,000 loan to rehabilitate three
townhouses comprising 9 apartments for low income renters. It was previously
denied DVCRF loans because of its for-profit status.
Neighborhood Housing Services of Camden. With a $302,000 loan, this
non-profit located in Central Camden is building 10 townhouses for sale. It
has been a DVCRF borrower since 1988.
North Camden Land Trust, is using a $250,000 loan to rehabilitate 8 scattered
site properties to create 11 housing units, a mix of duplexes and
single-family townhouses in North Camden.
Project HOME. Expected to receive a $1 million loan, Project HOME's 1515
Fairmount Project will provide 48 SRO (single room occupancy) housing units
in the Francisville section of North Philadelphia for previously homeless
individuals. The legal battles were resolved several months ago.
[from CLI's offering to prospective banks, by D. Hinkle]
CLI's MISSION STATEMENT
The Collaborative Lending Initiative, Inc. ("CLI") is a support corporation
of the Delaware Valley Community Reinvestment Fund, Inc. CLI exists to
increase the capital available to organizations that produce and/or operate
long term affordable housing for the economically and physically
disadvantaged. CLI seeks to increase the participation of conventional
financial institutions in the finance of such affordable housing through the
sale of loans, direct and indirect loan participation, technical assistance
and credit enhancements. CLI will increase access to capital through various
means; below market interest rates, liberal underwriting standards, technical
assistance in the application process, and reduced documentation and closing
costs.
EXECUTIVE SUMMARY
DVCRF has a history of lending in conjunction with banks to produce
affordable housing. This has happened through bank investments and equity
grants to the DVCRF loan pool and through co-lending and loan participations.
Today, banks represent 13% of DVCRF's $13 million loan fund.
Limits on DVCRF/Bank participation exist. This type of cooperation often
requires a lengthy turn-around time as two or more lenders underwrite and
approve each deal. Many banks have limited or no expertise in administering
construction loans and therefore cannot participate with DVCRF in this way.
Some banks share similar loan size constraints with DVCRF, limiting the size
of the project they can support. Finally, all banks are limited in underwriti
ng guidelines through regulation.
DVCRF proposes to form a support corporation, the Collaborative Lending Initia
tive, Inc.. This subsidiary will be a Pennsylvania non-profit corporation.
A 501c(3) designation will be requested. The purpose of the subsidiary will
be to finance community development projects that require loans in excess of
$250,000. The Collaborative Lending Initiative ("CLI") will seek to reduce
the limitations on DVCRF/Bank participations by standardizing and
streamlining the approval and administration processes.
CLI will have its own Board of Directors that will serve as a Loan Review
Committee. CLI will borrow from banks and DVCRF to fund the loans it makes.
To borrow from banks, CLI will seek to establish lines of credit in the form
of commitments to purchase promissory notes.
BENEFITS TO BANKS
* Access to DVCRF's construction lending expertise
Many community banks do not have the administrative or lending staff
necessary for successful construction lending and monitoring. CLI will
utilize the experienced DVCRF loan department and project consultants. Even
large regional banks can find it difficult to administer an affordable
housing construction loan in real estate departments structured for more
conventional lending.
* Low lending transaction costs vs. direct lending
Following a low income housing project from idea to completion can be a time
consuming process. The pressure on bank staff for efficiency limits the
number of loans that can be made to unsophisticated or inexperienced
borrowers. By financing an intermediary, banks gain a greater impact by
supporting a number of loans.
* Less risk due to diversity of portfolio and DVCRF's credit enhancement
The CLI Notes purchased by banks will be secured by all CLI assets. In turn,
each loan made by CLI will be secured. In addition to the underlying
collateral value securing the CLI portfolio, DVCRF (or other subordinate
lenders) will provide 25% of CLI's debt, subordinate to all bank Notes. This
25% discount on the portfolio provided by DVCRF's subordination is a
substantial credit enhancement to Note holders.
* Market rate return
Each Note issued will bear interest at the Prime Rate (as published by the
Wall Street Journal). We believe this rate of return is comparable to the
yield on direct construction lending, without the labor-intensive application
and monitoring processes.
* Access to DVCRF's extensive borrower base
The affordable housing industry in the Philadelphia market is complex..
Successful lending requires extensive knowledge of charitable funders,
federal, state & local government, governmental agencies, regulations, communi
ty organizations and builders. A non-performing loan with a non-profit can
be difficult and time consuming for a bank.
CLI will incorporate in its underwriting its extensive knowledge of the
industry in terms of borrowers, funders and regulators.
* An innovative method of Community Reinvestment Act compliance
CRA is a continuing, strengthening and evolving obligation of banks. The
consolidation of the banking industry will continue to make it more difficult
for community banks to remain CRA-relevant in the face of larger, regional
banks. Cooperation and innovation are logical methods for today's
community-oriented banks to meet CRA obligations.
DVCRF is committed to supporting local institutions with local capital.
Along those lines, CLI will provide a vehicle through which community banks
can begin to level the CRA playing field by pooling resources with an
experienced financial intermediary. Larger regional banks can benefit from
the economies of scale available with a lending intermediary.
STRUCTURE OF BANK LOANS TO CLI
Loan Type: Line of Credit (in the form of a commitment to purchase Notes)
Loan Amount: a minimum of $250,000 from each bank (in ten $25,000 Notes)
Loan Rate: WSJ Prime Rate, floating
Loan Term: The commitment to purchase Notes will be annually renewable
Note Term: Each Note will have a maturity date 3 years from the date it is
drawn
Note Repayment: Interest on each Note will be paid quarterly, principal will
be repaid from CLI loan portfolio repayments on or before maturity date
Pre-payment: Notes may be pre-paid in whole or in part, without penalty.
Collateral: Each bank will have general recourse to all CLI assets. Bank
lines will be enior to the DVCRF line of credit to provide a credit
enhancement. Specific loans will not collateralize the bank lines.
Documentation: Note Purchase Agreements and the Notes themselves will be
standardized legal documents to keep all lenders on equal footing.
Note Purchase: DVCRF will provide a written request for each Note purchase.
Bank purchaser agrees to advance funds by the end of the next business day.
DVCRF Line: DVCRF will provide a line of credit to CLI that will be
subordinated to all bank Notes. At all times, DVCRF (or other subordinate
Note holders) will hold a minimum of 25% of CLI's debt with the remaining
75% coming from bank Notes.
*********** Underwriting Standards, Policies and more programs description
available upon request:
Donald R. Hinkle
Managing Director - CLI
924 Cherry Street
Philadelphia, PA 19107
(215) 925-1130 voice
DVCRFCLI@aol.com
This post transferred from the cdb-l mailing list